Bank Accounts
One of the first things you should know as an NRI is that your existing bank accounts are no longer valid. The Foreign Exchange Management Act (FEMA) requires you to inform all the banks where you have an account, be it savings or deposits, about your changed residential status.
The banks will then classify your account as NRO (Non-resident Ordinary). Except for the change in nomenclature, there is nothing new about the account. You can continue using it as before. Payment of EMIs (Equated Monthly Installment) can go on. You can also hold the NRO account jointly with a resident. But the balance in the NRO account cannot be remitted outside India.
If you want the funds in your account to be freely repatriable outside India, an NRE (Non-Resident External) account would be ideal. This account will be maintained in rupees and any debit or credit of foreign exchange will be converted into rupees.
It cannot be opened jointly with a resident but you can allow a resident to operate it on your behalf.
For example, you can authorise your local relative or friend to make local payments or even remit money to you through this account by giving him / her a power of attorney.
Investment options
NRIs can invest only in five asset classes in India - bank deposits, stocks, mutual funds, real-estate and insurance. You can also invest in government securities and company deposits. But you cannot invest in PPF (Public Provident Fund), or bearer instruments such as NSC (National Savings Certificate) or Kisan Vikas Patras once your residential status changes.
Though you are barred from making any fresh investments, existing ones can be left undisturbed. However, they cannot be extended beyond maturity. You can continue to make periodic contributions to the existing PPF account even when you are abroad through your NRE or NRO account. When the investments mature, the proceeds will be credited to the NRO account.
Banks allow NRIs to invest in deposits through FCNRB (Foreign Currency Non-Resident (Banks) accounts. These are term deposits and can be maintained in some currencies such as the US dollar, pound sterling and yen etc. The funds in this account can be repatriated.
Equity Investments
With the stock markets on a roll, you are welcome to join the party. As an NRI, you are allowed to invest to your heart’s content in both stocks and mutual funds.
While you can continue investing in IPOs (Initial Public Offers) unmindful of your NRI status, there are some procedures to be followed when investing in the secondary market. All along, as a resident, you would have used a demat (dematerialized shares) account to buy and sell shares.
Now, this demat account has to be closed and the shares are to be transferred to a new NRO Demat Account. After this, you can either continue to hold those shares or sell them.
Although an NRO account means that funds are non-repatriable, the Reserve Bank of India allows funds from the sale of financial assets to be remitted outside India after some paperwork. Hence, wherever you are, you can enjoy the proceeds from the sale of shares.
To invest from abroad, you need to open a fresh NRI PINS (Portfolio Investment Scheme) demat account. PINS is a scheme of the RBI under which NRIs can buy and sell shares by routing them through their NRE / NRO account. (An NRE account is preferable, since you can freely transfer the funds abroad after selling the shares). Speculative transactions are not encouraged under PINS. Hence, you need to take / give delivery of shares.
For mutual fund investments, there are no procedural changes. Money can either be remitted from abroad or moved out of your NRE / FCNR accounts maintained at a
local bank.
The redemption or the dividend proceeds will be credited to the same account. Again, investments can be made both on a repatriable and on a non-repatriable basis.
For these purposes, the PAN card you obtained when you were a resident will hold good. You need not apply afresh.
Insurance and Real-Estate
Presently, NRIs can invest in life insurance policies in India without any limit on the cover. Some companies offer foreign-currency denominated policies and also allow you to pay the premium in foreign currency.
You can also invest in residential and commercial property in India without obtaining any special permission from the RBI.
Investment in agricultural land/plantation property/farm house is, however, not allowed.
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